Conceptual framework

ULIP is a market linked investment where the premium paid is invested in funds.
Different options are available, like 100% Equity, Balanced, Debt, Liquid etc. and
according to the fund selected, the risks and returns vary.

The costs are upfront and are transparent, the investment made is known to the
investor (As he is the one who decides where his money should be invested). There is
a greater flexibility in terms of premium payments i.e. A premium holiday is possible.
You can also invest surplus money by way of top ups which will increase your
investment in the fund and thereby provide a push to returns as well.

There is no assured Sum on survival, the higher of the Sum Assured or Fund
Value is paid at the maturity or in case of death.

Few reasons why we think ULIPs are better:

1. Free insurance cover: As seen in the above example, the insurance cover is free;
the policy even provides better returns

2. Best solution for children’s education/future needs ULIPs not only help save
money systematically for a particular goal, but also helps protect that goal

3. Switches without capital gains and entry loads: Unlike equity and mutual fund
investments which are subject to capital gains when sale is made; ULIPs have the
convenience of switching among the funds without any entry loads or capital gains
4. The Mortality charges are lower than traditional policies.

Unit-linked insurance plans (ULIPs) are the flavor of the season. Launched a couple
of years ago, these plans have contributed over 50 percent of the new business of
insurance companies such as ICICI Prudential, Birla Sun Life and Bajaj Allianz Life
Insurance Co Ltd.

Encouraged by the response, other players, too, are launching variants of

savings and endowment plans in the unit-linked format, a recent addition to the range
of insurance products.

The introduction of unit-linked insurance plans (ULIPs) has been, possibly, the
single-largest innovation in the field of life insurance in the past several decades. In a
swoop, it has addressed and overcome several concerns that customers had about life
insurance -- liquidity, flexibility and transparency and the lack thereof. These benefits
are possible because ULIPs are differently structured products and leave many
choices to the policyholder. Hence, as a customer, you must carefully consider
whether you can make such a product work well for you. Broadly speaking, I believe
that ULIPs are best suited for those who have a conceptual understanding of financial
markets and are genuinely looking for a flexible, long-term savings-cum-insurance
solution.

Put simply, ULIPs are structured such that the protection (insurance) element
and the savings element can be distinguished and hence managed according to one's
specific needs. Traditionally, the savings element of insurance has been opaque,
giving policyholders no control over asset allocation, no transparency, no flexibility to
match one's lifestyle, inexplicable returns and an expensive, complicated exit.

ULIPs, by separating the two parts within the same product, and managing
them independently, offer insurance buyers what no traditional policy had --
continuous information about how their policy is working for them. Often, people
wonder whether it's better to purchase separate financial products for their protection
and savings needs. Certainly, this is a viable option for those who have the time and
skill to manage several products separately. However, for those who want a
convenient, economical, one-stop solution, ULIPs are the best bet.

To understand how a ULIP meets the multiple needs of protection of both

health and life; and savings in the same policy, let us take the example of a 35-year-
old man with 2 young children.

With a premium of, say, Rs 30,000 p.a. he could begin with a sum assured of Rs
5 lakh, for which the life insurer would set aside a nominal amount of the premium to
cover this risk. The balance could be invested in a fund of his choice, possibly a
balanced or growth option.

As the children grow, he might want to increase the level of protection, which
could be done by liquidating some of the units to pay for a risk premium. On the other
hand, if he gets a significant raise, he could increase the savings element in the policy
by topping it up.

The key to good financial planning is to understand one's current and future
financial goals, risk appetite and portfolio mix. This done, the next step is to allocate
assets across different categories and systematically adhere to an investment pattern,
so that they work in tandem to meet one's requirements over the next month, year or
decade. Because of their flexibility to adjust to different life stage needs, ULIPs fit in
very well with financial planning efforts. Moreover, as a systematic investment plan,
ULIPs greatly diminish the hazards of investing in a volatile market, and using the
concept of 'Rupee Cost Averaging', allow the policyholder to earn real returns over
the long term.
When you're buying a ULIP, make sure you select one that works well for you. The
important thing is to look for and understand the nuances, which can considerably
alter the way the product works for you. Take the following into consideration.
 Charges: Understand all the charges levied on the product over its tenure, not just
the initial charges. A complete charge structure would include the initial charges,
the fixed administrative charges, the fund management charges, mortality charges
and spreads, and that too, not only in the first year but also through the term of
the policy. It might seem confusing at first, but a company provided benefit
illustration should help make this clearer. Some companies levy a spread between
the buy and sell rates of the units, which can significantly reduce the value of the
investment over the long-term. Close examination and questioning of such aspects
will reveal the growing power of your investment.

 Fund Options and Management: Understand the various fund options available to
you and the fund management philosophy and objectives of each of them.
Examine the track record of the funds thus far and how they are performing in
comparison to benchmarks. Who manages the funds and what experience do they
have? Are there adequate controls? Importantly, look at how easily you can access
information about your fund's performance when you need it -- are their daily
NAVs? Is the portfolio disclosed regularly?

 Features: Most ULIPs are rich in features such as allowing one to top-up or switch
between funds, increase or decrease the protection level, or premium holidays.
Carefully understand the conditions and charges associated with each of
these. For instance, is there a minimum amount that must be switched? Is there a
charge on the same? Must you go through medical underwriting if you want to
increase the sum assured?

 Company: Last but not least, insure with a brand you can trust to honor its
commitment and service you according to your requirements.
Having bought a ULIP, it’s important that you monitor it on a regular basis, though
not as frequently as you would a stock or mutual fund. Your ULIP is a long-term
investment and daily fluctuations in the NAV should not impact you. Check once a
quarter to see how your fund is performing, and consider a switch if there is a change
in the level of risk you are willing to take or in your personal market view. Monitor
your fund; value it in the few weeks or months before a planned withdrawal or top-
up, or a change in your life stage or lifestyle. For those who are still finding their feet
with their ULIP and its multitude of options, the best thing to do is to consult your
advisor.

Life insurance as a form of protection is the single-most important financial

product any earning member of a family must have. Having said this, a well-
diversified portfolio is one of the first rules of financial planning, and as such one
should consider different instruments as the ability to save increases. Certainly ULIPs
successfully combine the first and most important need of protection, with savings,
and hence are an excellent addition to your portfolio. These can be combined with
various other products, after taking into account your risk appetite, financial goals
and need for portfolio diversification.

Possible investment options range from bank deposits and government small
saving schemes to mutual funds, stocks and property.

Buying a ULIP is quite different from buying a traditional insurance product;

and sometimes there are cases of people who believe they have been mis-sold a ULIP,
the complaint most often being that they were not aware of the risks or the charges.

All financial products have a certain amount of risk and charges, be it a mutual fund,
property, or even a bank deposit. It would be unrealistic to assume that the features and
benefits of a ULIP come at no cost, though the charges are considerably lower than that of a
traditional product.
 REVIEW OF LITERATURE

Soniya khurana (2008) analyzed the customer preference in de insurance industry in India.
She had analyzed the customer preference regarding plans and company, their purpose of
buying insurance policies, satidaction level and their finae plans for the new insurance policy.

Mr. KBS Kumar edited the book “Insurance customer service of KCFAI University press
includes the chapters like “Tracking customer satisfaction by Mr. Tom normam

U Jawaharlal and Nikhil Pareek analyzed the customer service in Life Insurance In Insurance
Chronicle (April 2004) he had unlved the different services of Life Insurance players in Indi
Narayan Krishnamurthy in Outlook money (Sep 15, 2003) article analyzed the situational
Need of Insurance at different stations and steps of e in his article “AT every step of

In 2006 the socioeconomic factors that are responsible for taking e insurance policies and
examined the preferences of the policyholders towards various types of policies of LIC were
analyzed. From the analysis, it was found that factors such as age, educational level and sex
of the policyholders are insignificant. However, income level occupation and family sie ure
significant while deciding on an insurance policy. From the analysis, it is inferred that
respondents bekmging to the age group of 31 to 40 years are mich interested in taking a Me
insurance policy

Mutual Funds have amracted a lot of attention and kindled the interest of both academic and
practitioner communities. Compared to the developed markets, very few studies on Mutual
Funds are done in India. This erature review reveals investor behaviour sales. The research on
mail finds has been extremely skewed in terms of geographical coverage. Most focused to
developed countries US

Tamal Datta chaudhuri, Jayanta Kumar seal, edited the book named ‘Mutual Funds Industry
clades empirical study titled “performance of mutual fund in India: an empirical study. Mary
Rowland written The New Common sense Guide to mutual funds it includes the guidelines
while investing in manual fund. How should one invest in mutual fund and when what step
should be taken in a station by a investor.
Gupta LC (1993) conducted a household investor survey with the objective to provide data on
investor preferences on Mutual Funds and other financial asset